foreclosure and chapter 7 bankruptcy - Who will sell your house? the foreclosure trustee or the the chapter 7 trustee? And once it is sold, will you get to keep your exemption dollars?
If the foreclosure trustee sells it, I'd imagine, they will not sell it for full market value, and you won't get anything because they will just sell it to themselves. If the chapter 7 trustee sells it, I am guessing that you might get your exemption, and later you might get some more money back, depending on how successful the sale is and how much you owe to other creditors. But, will the bank just ask the judge for relief from stay and foreclose?
It all depends on how much equity is in your house. If there is little to none, the trustee probably doesn't care about it. A lot equity the trustee will sell it for sure, little to none, probably ends up being foreclosed. Either way, depending on your other assets it's important that you claim an exemption in the house or the proceeds so you can collect from either party. Just which exemptions you should use in your particular situation is question for an experienced bankruptcy attorney. Call a few of the local attoneys here on , and get a free consultation. Your situation is too complex to be answered here in this forum.
To properly address your question, an attorney needs to know how much is owed in mortgages and liens upon your home (First Mortgage, HELOCs, 2nd Mortgages; PLUS, involuntary liens by the IRS, FTB, County Taxing Authorities, Homeowners Assns., etc...) These are all public records that can be researched at your county recorder's office. If all you owe is a First Mortgage, the most important question is whether the amount owed is sufficiently low that a Chapter 7 Trustee would realize a "profit" after paying off the mortgages, your exemption, plus all of the costs of sale following his/her sale of the home? If the C-7 Trustee doesn't see any remaining equity after paying you your exemption amount and the costs of sale, he/she will usually not sell it (In rare cases, the trustee can negotiate with junior lien holders or strip their interests, thus making a sale more "profitable".). So, the foreclosure can go forward if: 1. Relief from stay is granted (which is usually not the case in a Chapter 7 due to the short duration of the Chapter 7, and rarely happens if the Trustee opposes the Relief form Stay); or 2. The Bankruptcy Trustee abandons the property at the conclusion of the case.
In any case, Foreclosure will only be allowed by State Law if you are delinquent on your payments, which due to your wording in your question, we are assuming that you are delinquent. The foreclosing mortgagee must follow strict state laws that require certain notices and the passage of certain time periods.
During the Bankruptcy, all collections must cease, except the Trustee is able to take action under authorization of Bankruptcy Law, since he/she owns the property as part of your Bankruptcy Estate. Collections, including foreclosure, are forbidden unless the court grants a Relief from Stay (aka RFS), which will only happen if the C-7 Trustee does not oppose it. A Trustee opposes RFS only if he can make money to pay the general unsecured creditors a meaningful distribution.
So, assuming the C-7 Trustee decides to sell your home. He must pay you your entire valid Exemption amount, without surcharge for costs of sale, etc.... He must then pay off the mortgages and any liens that he cannot strip. He then pays the remaining funds to the creditors who make claims according to their priorities (Child and Spousal support are paid first, then, typically, unsecured taxes.) on a pro-rata basis. He applies to the court for reimbursement of his expenses and his commission. Only if there are more proceeds left over will he give you any more money.
If the Foreclosure Trustee hired by the Mortgagee sells your home at auction, you are not likely to see any proceeds, though it must happen if they sell for more than theirs and others' liens are owed.
If you have not yet filed Bankruptcy, please do not take our answers and make decisions based only on these "free" answers. This is only general information, and is not intended to give you what you need to "do it yourself." People who try that are assuming that our answers are accurate. However, there is so much more to Bankruptcy, foreclosure and Chapter 7 issues than you could possibly imagine. I do not mean to doubt your intelligence nor your ability to study up on the issues relating to these topics. The fact is, an experienced attorney knows how to get the correct information that will enable you to make the best decision for you. We cannot possibly do that here. This forum is too limited. The questions that you have asked and the ones you should have asked are far more complicated, so PLEASE do not rely on your intuition - Bankruptcy is counter-intuitive. Seek a free consultation from an experienced, local attorney. You can do that by clicking on 's "Find a Lawyer" tab, above. You can read the reviews of each and meet with a couple to find one you are comfortable with. Great attorneys can also be found at www.nacba.org, the largest organization of Consumer-dedicated Bankruptcy Attorneys in the nation.
